ICICI Lombard General Insurance Company Limited IPO - Should You Subscribe?

Last year during the same time, to be precise on September 19,2016, ICICI Prudential Life Insurance Company Ltd company had hit the market through its IPO. It had received a huge response under every category of investors. However, it was a fiasco. It was a major set back of 2016 after the debacle of L & T Technology services which is still under its issue price.

 

ICICI Prudential was listed at discount. Retail investors clutched their head in desperation. Later on, ICICI Prudential share picked up the momentum and made its investors danced in joy. Issue price was 334, and its CMP is Rs. 426, and 52 week high is Rs. 507. It gave good return in the span of five months.

 

During the same time in this year, ICICI Group's another company has come up with its IPO. ICICI Lombard is going to put its first stem in the market on September 15, 2017. The issue is closing on September 19,2017 and company has set the price range of Rs. 651 - Rs. 661.

 

As we all know that ICICI Lombard is the subsidiary company of ICICI Bank Limited. ICICI is a household name. ICICI Lombard is belong to cash rich companies community which doesn't need any money from the market. It has all source of getting money at the cheapest rate without diluting existing shareholding. So apparently, ICICI Lombard has come up with its IPO for 100% offer for sale. As I said, the company doesn't need the fund, existing shareholders are selling their shares.

When there is 100% offer for sale, market analysts are very apprehensive as to advise to subscribe the IPO or not because the company shall not receive a single penny out of IPO proceeds. Here, the scenario is totally different. Even though, it is 100% OFS, I would recommend to APPLY.

The list of selling shareholders :

The objects of the offer are to achieve the benefits of listing the equity shares of the company on the stock exchanges and to carry out the sale of up to 8,62,47,187 share by the selling share holders. The listing of the equity shareholders will enhance the "ICICI Lombard" brand name and  provide liquidity to the existing share holders. The listing will also provide a public market for the equity shares in India. 

For ICICI Bank Shareholders, they have reserved 5% shares. Retails investors allocation is 35%, while 47% & 14% portion is for Qualified Institutional Buyers and Non - Institutional Investors respectively.

The company has set price is little higher. The EPS at the end of March 2017 was Rs. 14.32. At the higher price band (Rs. 661) and at the lower price (Rs.651), PE Multiple comes between 45.46 - 46.16. This indicates share price is little higher, however, seeing the market leadership of ICICI Lombard in private non-life insurance business, this littler higher price can be ignored.

ICICI Lombard is the largest private-sector non-life insurer in India based on gross direct premium income in fiscal 2017, a position it has maintained since fiscal 2004 after being one of the first few private-sector companies to commence operations in the sector in fiscal 2002, according to the CRISIL Report. It offers its customers a comprehensive and well-diversified range of products, including motor, crop/weather, health, fire, personal accident, marine, engineering and liability insurance, through multiple distribution channels. It was founded as a joint venture between ICICI Bank Limited, India’s largest private-sector bank in terms of consolidated total assets with an asset base of ₹ 9.9 trillion at March 31, 2017, and Fairfax Financial Holdings Limited, a Canadian based holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management with US$43.38 billion of total assets at December 31, 2016.

In fiscal 2017, it issued approximately 17.7 million policies and its gross direct premium income was ₹ 107.25 billion, translating into a market share, on a gross direct premium income basis, of 8.4% among all non-life insurers in India and 18.0% among private-sector non-life insurers in India, according to the CRISIL Report. For the three months ended June 30, 2017, it issued approximately 5.2 million policies and its gross direct premium income was ₹33.21 billion, translating into a market share, on a gross direct premium income basis, among all non-life insurers in India of 10.0% and among private-sector non-life insurers in India of 20.2%, according to provisional and unaudited figures for non-life insurers released by IRDAI. Its key distribution channels are direct sales, individual agents, bank partners, other corporate agents, brokers and online, through which it service its individual, corporate and government customers. Its distribution network enables it to reach customers in 618 out of 716 districts across India

 

As of March 31, 2017, it had the largest total investment assets among the private-sector non-life insurers in India, according to the CRISIL Report. As of June 30, 2017, it had ₹ 164.46 billion in total investment assets with an investment leverage, net of borrowings of 4.07x as at June 30, 2017. ITs investment policy is designed with the objective of capital preservation and achieving superior total returns within identified risk parameters. Its annualised total portfolio return (including unrealised gains) for fiscal 2017 was 13.0%. Its total portfolio return (including unrealized gains) for the three months ended June 30, 2017 was 3.6% (annualised 14.4%). Listed equities made up 14.8% of its total investment assets, by carrying value, as of June 30, 2017.

 

Since fiscal 2004, its listed equity portfolio has returned an annualised total return of 30.8%, as compared to an annualised return of 17.5% on the benchmark S&P NIFTY index. During the same time period, our equity portfolio outperformed the S&P NIFTY index in all but one fiscal year. For the three months ended June 30, 2017, our listed equity portfolio has returned a total return of  6.9%, as compared to a return of 3.8% on the benchmark S&P NIFTY index.

There are many reasons why should you subscribe this IPO

1. Consistent market leadership and demonstrated growth
2. Diverse product line with multi channel distribution network
3. Delivering excellence in customer value
4. Robust risk selection and management framework
5. Focus on investments in technology and innovation
6. Strong investment returns on a diversified portfolio
7. Superior operating and financial performance
8. Experienced senior management team and enabling work culture

Conclusion

Since incorporated in 2002, the company's has grown phenomenally. Its EPS, Profitability and Return on Net worth has shown upward arrows in the last three years.
                                                            (Rs In Crore)

Return on net worth is in %. And EPS is per share




SUBSCRIBE
There is no need to write much for ICICI Group IPO.

Thank you for reading..Jai Hind

CA Prashant Seta

(Disclaimer : I've opined based on my knowledge and understanding, an investor should do his/her own research before applying)